October saw £730.75m transact across five deals – a 33% increase on October 2020 where only four buildings traded totalling £550.5m, and ahead of the five-year average for the month of October (£715m). Total transactional volume for the City at the end of October now stands at £6.12bn across 65 transactions, 104% ahead of this point last year where only £3bn had transacted but 20% below the previous five-year average of £7.67bn.

As we enter the final few months of 2021, there is currently £1.625bn under offer across 28 transactions, with a further £4.97bn worth of assets being openly marketed. As noted in previous months, the level of availability is slightly misleading, as 75% of all properties in the market have a value in excess of £100m. Looking ahead, it is likely that much of the current larger availability will not exchange this year, potentially signalling a busy start to the new year.

In the most notable acquisition of the month, Omnicom Group Inc acquired its London HQ at 2 & 3 Bankside from German fund manager DWS for £440m, reflecting a net initial yield of 4.52% and a capital value of £1,058 psf. Occupying a substantial 2.4-acre island site in a prime Southbank location, the long leasehold properties comprise two landmark HQ buildings totalling 415,981 sq ft of Grade A office and retail accommodation arranged over basement, ground and nine upper floors. The sale of 2 & 3 Bankside was a significant bellwether transaction for the market, following an extremely competitive bidding process, the asset traded £30m ahead of the quoting price. The sale also highlighted clear investor appetite for best-in-class real estate, a theme we expect to continue into 2022 as investors look to own quality real estate which meets occupiers evolving sustainability standards.

In their first transaction in the City market since 2019, Nuveen acquired the Clerkenwell Collection, a seven asset real estate portfolio that was first launched to the market two and a half years ago. After a number of failed sale attempts, Nuveen has reportedly acquired the portfolio for approximately £190m. The collection of buildings comprises 194,375 sq ft of office, retail and ancillary accommodation. The largest asset within the portfolio was Sutton Yard, 65 Goswell Road, a recently repositioned former warehouse building, which is designed around a central courtyard and is the current UK headquarters for GoCardless.

The month of October continued the trend across 2021, which has seen a number of larger £100m+ assets trade, with a further two in October, taking the year's total to 19, accounting for £4.7bn of volume (76%). The record for larger assets (£100m+) trading was in 2017 when 34 buildings sold with a value over £100m, including both ‘The Cheesegrater’ and ‘The Walkie Talkie’. Despite a comparatively low number of available properties in the market today, it is clear that since September, there has been a marked change in the number of assets being formally marketed. In October alone, 15 buildings were launched to the market, a number of which are already progressing to formal bidding.

With the acquisition of 2 & 3 Bankside, North American investors are now the leading buyer group in the City, accounting for 30% of total volume acquiring seven buildings totalling £1.88bn. Despite a return to the market for Asian investors in September, we did not see this trend continue into October. However, with the opening of travel corridors between the UK and Singapore on 19th October, we anticipate investors from this country to be active in the final two months of the year. In fact, pandemic travel restrictions have been considerably lessened, and as of 1 November, there are no countries on the UK’s red list, allowing investors from all countries to enter without having to quarantine.

Savills prime yield now stands at 3.75%, which compares to the West End prime yield of 3.25%. The MSCI City average equivalent yield currently stands at 5.48%, while the net initial yield is 3.02%.

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